This paper analyzes the development process and future direction of China’s South China Sea (SCS) policy, focusing on the organizational history of its State Oceanic Administration (SOA) that oversees the maritime administration under the State Council. Most previous studies on China have examined the SCS issue from a diplomatic, if not military, perspective. However, coastal states, in general, take two kinds of approach toward the disputed maritime zones they lay claim to. Recognizing the not-yet-demarked status of the disputed water, the international approach respects other claimants’ potential rights and seeks to control frictions in a cooperative manner before permanent delimitation. The Ministry of Foreign Affairs often carries this responsibility in domestic bureaucracy. The second approach, that is, the domestic approach puts higher priority on establishing effective control over the disputed water, by exclusively strengthening their administration against other states. In China, the SOA has devoted itself to this mission for decades, aiming to protect China’s maritime rights but only won recognition from central leaders after 2006.

The paper solves two puzzles regarding external Chinese behaviors. First, it answers why Chinese leaders shifted from a cooperative SCS policy to an aggressive one, using paramilitary forces belonging to the SOA in mid-2000. Chinese leaders first allowed SOA to initiate a regular patrolling system over the disputed water of the East China Sea in the summer of 2006, considering the soaring anti-Japanese nationalism in domestic society. Supported by the People’s Liberation Army Navy, SOA used the opportunity to expand the patrolling system over all of Chinese “jurisdiction water” the next year. Second, it reveals why China began reclamation of seven disputed maritime features in Spratly Islands in mid-2010. Given the tailwind of the domestic politics, SOA successfully achieved the legislation of “Island Protection Law” in 2009 that enabled it to establish administrative measures to enhance island control. Cooperating with the military authorized to manage offshore islands in the Chinese domestic system, SOA stepped forward to prepare reclamation plans to consolidate Chinese presence in the SCS.

Unlike Hu Jintao administration that was vulnerable to the domestic criticism and therefore accepted SOA’s proposals without much consideration, Xi Jinping tightened his control over the SOA. He continues to prioritize the domestic approach, but aims at not raising international tension over maritime issues. The SOA was given the new task of establishing Maritime Silk Road under his initiative. Regarding the SCS, China is trying to find a way to make other claimants respect its rising influence by providing economic carrots to them in the new scheme, in the near future.

This paper explores territorial disputes in the South China Sea by comparing the approaches of the Philippines and Vietnam. The analysis centers on a) the process of approximating the two countries’ approaches; b) conditions on which to differentiate the two countries’ relationship with the South China Sea policy; and c) mutual interactions between the two countries, as evidenced through both the ASEAN mechanism and bilateral relations. The concept of “hedging” is employed in order to achieve equilibrium when considering their external relations.

In 2012, Philippino President Aquino reinforced a confrontational stance toward China, during a stand-off in the Scarborough Shoal. This stance included the strengthening of the Philippino-U.S. military alliance and emphasized the utilization of international arbitration. However, the subsequent Duterte administration completely changed Aquino’s approach by engaging in bilateral talks with China, and eroding the Philippines’ cooperation with the U.S. The Philippines shifted from a strong hedge to a weaker one.

Vietnam had adopted a policy of “omnidirectional military diplomacy” to address the South China Sea, reinforcing cooperative ties with all external players, including China. However, the 2014 oil-rig incident revealed the limited effect of “omnidirectional military diplomacy.” Since this incident, Vietnam pursues a strengthened relationship with the U.S., while continuing to keep ties with China. Vietnam has been shifting from a weak hedge to a stronger one. In this regard, the hedging strategies of the Philippines and Vietnam continue to approach that of the other.

The differences of approach between the two countries stem from differences in preconditions regarding relations with the U.S. and China. The Philippines has long been a U.S. military ally, whereas Vietnam’s foreign policy has emphasized maintaining a stable relationship with China. Vietnam also has pursued its strategic independence by promoting an “omnidirectional military diplomacy” with all major players in the region, including the U.S. and Japan. Domestically, the Philippines’ foreign policy changes greatly with a change in administration, while Vietnam’s basic stance in external relations is relatively consistent, regardless of any changes to its political leadership. Furthermore, as the Philippines, under President Duterte, prefers a reconciliatory attitude toward China, Vietnam, still strongly critical of China, might be “isolated” within ASEAN.

Since the mid-1990s, in the face of the growing deterioration of territorial disputes in the South China Sea, the Association of Southeast Asian Nations (ASEAN) has taken the initiative to build regional maritime rules in the aim of promoting conflict prevention and management mechanisms. Their efforts have successfully resulted in the emergence of a number of regional rules involving China. Some of the most notable examples are the Declaration on Conduct for Parties in the South China Sea (DOC) in 2002, the guidelines for the implementation of the DOC in 2011, and the framework of the Code of Conduct in the South China Sea (COC) in 2017. However, in recent years, as competition amongst clamant countries has intensified, the infringement of the DOC has become an increasingly common phenomenon at sea. This is evinced by China’s massive reclamation activities in the Spratly Islands, as well as the strengthening of existing facilities on their occupied islands and shoals on the part of other claimant countries; these include the Philippines, Vietnam, and Malaysia. With the weakening credibility of the DOC, in 2013 ASEAN and China agreed to commence drafting the COC. However, despite the fact that the ultimate goal of ASEAN’s initiative is to produce an enforceable binding code of conduct, the framework of the COC fails to specify the phrase “legally binding”, mainly due to China’s opposition. These recent developments raise serious doubts between regional observers about the credibility of ASEAN’s managerial role in the South China Sea disputes.

Against this backdrop, the article seeks to illuminate the efficacy and limitations of ASEAN’s rule-making initiatives in the South China Sea. Structurally, the article is split into four section. The first section focuses on analyzing the main features of ASEAN’s approach to the rule-making in the South China Sea. The second section engages a historical investigation of ASEAN’s actual diplomacy in the processes of rule-making. The analysis is divided into four phases; 1) ASEAN’s initial diplomacy (1990–1995), 2) the conclusion of the DOC (1998–2002), 3) the making of the guidelines for the implementation for the DOC (2004–2011) and 4) negotiations over the framework of the COC (2012–2017). Based on the above analysis, the article then elucidates the utilities and limitations of ASEAN’s rule-making diplomacy. It is argued that while the “ASEAN way” of rule-making has made significant contributions to the development of conflict prevention measures and the promotion of “self-restraint” behavior among the claimants to some extent by ensuring their long-term commitment to the rule-making processes, it has nonetheless created problems of “definitional vagueness” and “decoupling”. As the power gaps between ASEAN states and China have rapidly grown, these weaknesses that are inherent in ASEAN’s rule-making diplomacy have become more prominent. The concluding section discusses the prospects for the politics of the rule-making in the South China Sea.